I agree with Nammu that insurance companies should not be making medical decisions. Sleep disorders are not trivial matters. Insomnia can horribly disrupt your daily life, as I know first hand. To lose a prescription that you found really helpful must feel awfully disappointing. I wonder if you could pay for Ambien yourself and get it that way. (I don't know how expensive it is.)

Was it a psychiatrist or a primary care doctor who prescribed it for you? If it was a PCP, you might ask for a psych consult. A pdoc might be able to write up a more compelling argument possibly persuasive to the insurance company. There are doctors who specialize in sleep disorders. One of them might bolster your appeal. I recognize that's a lot to go through for what you know has helped you.

We live in an age of diagnosis by algorhythm and treatment by algorhythm. Providers are supposed to follow "decision trees" and slavishly check off lists of criteria. A computer can be programmed to do that. What a computer can be programmed to do does not take into consideration all that should be considered. It's frustrating.

You might try keeping a sleep journal where you document all awakenings. This can give a doctor more hard data for building a case.